The Constitutional (One-Hundred and First) Amendment Act, 2016 which was enacted on  September 16, 2016 made crucial changes to the Constitution of India, 1950 and lead to  introduction of Goods and Service Tax regime in India.

The most striking feature of the Constitutional Amendment was to grant concurrent taxing  powers to both the Centre and the States with respect to goods, services and both. In order to  ensure this concurrent power, basic taxing entries that were present under List I and List II of  the Seventh Schedule were either omitted or significantly amended and the field of taxation  along with levy to tax was unified under a single Article, i.e., Article 246A.

Therefore, Goods and Service Tax is a unique tax which finds both power as well as field of  legislation under a single Article, i.e., Article 246A and has no supporting entry in the seventh  schedule. Emphasising on this peculiar feature of Goods and Service Tax, a unique petition has  now been filed before the Hon’ble Punjab and Haryana High Court, wherein, the petitioner has  challenged Constitutional Validity of Section 69 and Section 132 of the Punjab Goods and  Service Tax Act, 2017.

The Challenge is primarily based on the argument that Section 69 (arrest) and Section 132 (which makes certain acts offences and prescribes maximum punishment of 5 years) are  criminal in nature and thus, could not have been enacted under Article 246A. Further, the  contention is supported by placing reliance upon entry 93 of List I and entry 64 of List II of the  seventh schedule. While entry 93 of List I provides the field to make criminal laws with respect  to matters in list I to the Parliament, entry 64 of List II provides similar field of legislation to  the States; therefore, the argument that as making an offence amounts to enacting a criminal  law, Section 69 and Section 132 could not have been enacted under general power to levy tax  under Article 246A and thus, are beyond the legislative competence of the States.

Though the argument appears to be appealing on the first reading, it can be found to be  misplaced because of the following reasons:-

Firstly, scope of Article 246 A is significantly wide and its scope is not same as erstwhile  taxing entries.

Article 246A reads as: “Special provision with respect to goods and services tax.-

(1) Notwithstanding anything contained in article 246 and 254, Parliament, and, subject to  clause (2), the legislature of every State, have power to make laws with respect to goods and  services tax imposed by the Union or by such State.

The words ‘laws with respect to’ are of paramount importance here. Article 246A not only  empowers the legislature to merely levy tax or enact Goods and Service Tax Act, it grants the  power to make all laws ‘with respect to’ or as it may be stated ‘in connected with’ or ‘pertaining  to’ Goods and Service Tax. Thus, it must necessarily include the power to enact offences ‘with  respect to’ goods and service tax and Article 246A must be interpreted widely and the term  ‘with respect to’ must be given expansive meaning.

Secondly, even if it is to be believed that power to make offences in relation to evasion of  goods and service tax is not founded under Article 246A, then, the same can be found under  Entry 1 List III.

Entry 1 List III reads as:- “Criminal law, including all matters included in the Indian Penal  Code at the commencement of this Constitution but excluding offences against laws with  respect to any of the matters specified in List I or List II and excluding the use  of naval, military or air forces or any other armed forces of the Union in aid of the civil power.”

The term ‘Criminal Law’ used in the above entry is significantly wide and includes all criminal  laws except the exclusions: laws made with respect to matters in List 1 and List 2 and laws  relating to Armed forces.

The term ‘Criminal Law’ in entry 1 List III has been interpreted on numerous occasions (while  interpreting vires of TADA Act, Prevention of Corruption Act etc) and in a significant  judgment of the Hon’ble Supreme Court in Kartar Singh v. State of Punjab, (1994) 3 SCC  569; Hon’ble Mr Justice Sahai concurring with the majority has emphasised on the need and  scope of entry 1 list III. It has been stated that the language used in the entry is couched in very  wide terms and the term ‘criminal law’ would validly include anything which is criminal in  nature and thus, full play to legislative entry has to be given. Further, it is stated that the term  criminal law means any Act or Rule dealing with crime and what is a crime in a given society  changes with change in political, economic and social-set up of the country and various  industrial and taxation statutes are an ample example of the same. The Constitutional makers  foresaw this eventuality and therefore, they empowered both Centre and States to make laws  in this regard and the power here includes power to define a crime and to provide for its  punishment. Entry 1 List III will not only include crime under Indian Penal Code, but any  matter, which could reasonably and justifiably be considered as a crime.

Thus, even if Section 69 and Section 132 could not have been enacted in pursuance to power  under Article 246A, they could have been validly enacted under entry 1 List III, as laying down  of a crime and providing for its punishment is ‘criminal law’.

Further, the argument that since power to levy GST is under Article 246A, power in relation to  GST cannot be found under Article 246 and help cannot be taken from entries in schedule  seven, is also mis founded, as, Article 246A would over-ride Article 246 only in cases of  conflict and not when there is no conflict at all.

Therefore, it does not appear that there is any legislative infirmity in enacting Section 69 and  Section 132 and thus, this significant power in the hands of the State shall not be curtailed.

Author Bio

Qualification: LL.B / Advocate
Company: N/A
Location: Chandigarh, IN
Member Since: 12 Jun 2020 | Total Posts: 1

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